HEMENDRA R MERCHANT, MUMBAI V. ASST CIT CEN CIR 35, MUMBAI

ITA 3151/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4185 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 07-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Unexplained investment; Search and seizure; Tax effect
• Section: 80G; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM ./ I.T.A. NO.3151/MUM/ 2011 ( / ASSESSMENT YEAR: 2007 - 08) MR.HEMENDRA R MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001. / VS. ASTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020.. ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.3600/MUM/ 2014 ( / ASSESSMENT YEAR: 2007 - 08) MR.HEMENDRA R MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001. / VS. ASTT. COMMISSIONER OF INCOME TAX CENTRA L CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.53/MUM/ 2012 ( / ASSESSMENT YEAR: 2008 - 09) ASTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. / VS. MR.HEMENDRA R MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001. ( / APPELLANT ) .. ( / RESPONDE NT ) I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 2 CROSS - OBJECTION NO.261/MUM/2012 ARISING OUT OF I.T.A. NO. NO.53/MUM/ 2012 ( / ASSESSMENT YEAR: 2008 - 09) MR.HEMENDRA R MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001. / VS. ASTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. :ACRPM3515F ./ I.T.A. NO . 31 44 TO 3150 / MUM/ 201 1 ( / ASSESSMENT YEA R S : 20 0 1 - 02 TO 2007 - 08 ) MR S . HEMA HEMENDRA MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001. / VS. ASTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKA R BHAVAN, M K ROAD, MUMBAI - 400020.. ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO . 7672 / MUM/ 201 3 ( / ASSESSMENT YEA R : 200 3 - 04 ) ASTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FL OOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. MRS.HEMABEN HEMENDRA MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001 ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO . 927 / MUM/ 20 1 4 ( / ASSESSMENT YEA R : 200 3 - 04 ) MRS.HEMABEN HEMENDRA MERCHANT, 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, / VS. ASTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKAR BHAVAN, M K ROAD, I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 3 MUMBAI - 400001 MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : ACRPM3514E ./ I.T.A S . NO .314 1 TO 314 3 / MUM/ 2011 ( / ASSESSMENT YEA R S : 20 0 5 - 06 TO 2007 - 08 ) M/S.HEMABEN & H EMENDRA MERCHANT S TRUST, , 211/219, 2 ND FLOOR, BHARTI BHAVAN, PDMELO ROAD, FORT, MUMBAI - 400001. / VS. ASTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 35, ROOM NO.104, FIRST FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLAN T ) .. ( / RESPONDENT ) ./ ./PAN. : AABTM6372Q / ASSESSEE BY SHRI NITESH JOSHI / REVENUE BY SHRI RAHUL RAMAN / DATE OF HEARING : 4.2 . 201 6 / DATE OF PRONOUNCEMENT: 4 . 2 . 201 6 / O R D E R P ER B ENCH : ALL THESE APPEALS BELONG TO THE SAME GROUND AND ISSUES URGED THEREIN ARISE OUT OF COMMON SET OF FACTS. HENCE THEY WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE FACTS RELATING TO THE CASE ARE DISCUSSED IN BRIEF. BOTH THESE PERSONS, VIZ., SHRI HEMENDRA R MERCHANT AND SMT. HEMA H MERCHANT ARE ENGAGED IN THE BUSINESS OF PROVIDING SECURITY GUARDS /SE CURITY SERVICES TO VARIOUS ENTITIES INCLUDING PUBLIC SECTOR UNDERTAKINGS, BANKS ETC. THEY HAD I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 4 FLOATED MANY PARTNERSHIP CONCERNS FOR CARRYING ON THE BUSINESS OF PROVIDING SECURITY SERVICES/PERSONNEL AND HAD ALSO CARRIED ON THE SAID BUSINESS BY FLOATING PRO PRIETARY CONCERNS ALSO. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF SHRI HEMENDRA R MERCHANT ON 21.12.2006. IT WAS NOTICED THAT THE RECORDS OF THE BUSINESS WAS NOT PROPERLY MAINTAINED. DURING THE COURSE OF SEARCH, THE SEARCH OF FICIALS ALSO NOTICED THEY HAVE MAINTAINED MANY UNACCOUNTED FIXED DEPOSITS WITH THE BANKS. DURING THE COURSE OF SEARCH, SHRI HEMENDRA R MERCHANT MADE A DISCLOSURE OF RS.5,12,23,284/ - IN THE STATEMENT TAKEN FROM HIM U/S 132(4) OF THE ACT. 3. DURING THE CO URSE OF SEARCH, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND WHICH SHOWED THAT THERE WAS HUGE DIFFERENCE BETWEEN THE SECURITY CHARGES COLLECTED FROM THE CUSTOMERS AND THE ACTUAL SALARY PAID TO THE SECURITY PERSONNEL. THE AO, UPON EXAMINATION OF THOSE DOCUME NTS, CAME TO THE CONCLUSION THAT THE PROFIT MARGIN OF THE ASSESSEES IS ABOUT 70%. IN THE ASSESSMENT PROCEEDINGS RELATING TO THE ASSESSMENT YEARS 2001 - 02 TO 2006 - 07, THE ASSESSING OFFICER EXAMINED THE DETAILS OF INVESTMENTS MADE BY THE ASSESSEES. HE NOTIC ED THAT, APART FROM THE AMOUNT OF RS.5,12,23,284/ - DISCLOSED BY THE ASSESSEE, SOME MORE UNACCOUNTED INVESTMENTS WERE AVAILABLE AND THE AGGREGATE AMOUNT OF UNDISCLOSED INVESTMENTS WERE FOUND TO BE RS.8,12,52,296/ - . THE INCOME ESTIMATED BY THE AO AT 70% OF THE GROSS RECEIPTS FOR THE YEARS 2001 - 02 TO 2006 - 07 WORKED OUT TO RS.8.11 CRORES IN AGGREGATE. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE ESTIMATE OF 70% ADOPTED BY HIM IS VINDICATED BY THE AVAILABILITY OF UNDISCLOSED INVESTMENTS TO THAT EXTENT. 4. ACCO RDINGLY, BY ADOPTING THE PROFIT RATE OF 70% AS THE BASIS, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF SHRI HEMENDRA R MERCHANT FOR ASSESSMENT YEAR 2007 - 08. I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 5 5. IT IS PERTINENT TO NOTE THAT THE ASSESSMENTS IN THE HANDS VARIOUS PARTNERSHIP FIRMS W ERE ALSO COMPLETED BY DETERMINING THE INCOME AT 70% OF THE GROSS RECEIPTS. HOWEVER, IN THE APPEALS FILED BY THE PARTNERSHIP FIRMS, THE LD CIT(A) REDUCED THE INCOME TO 10% OF THE GROSS RECEIPTS AND THE SAME HAS BEEN UPHELD BY THE CO - ORDINATE BENCH OF TRIBU NAL, VIDE ITS ORDER DATED 16 - 12 - 2015 PASSED IN ITA NO.5671/MUM/2010 AND OTHERS. 6. IT IS ALSO PERTINENT TO DISCUSS ABOUT THE DEVELOPMENT THAT TOOK PLACE IN RESPECT OF THE ASSESSMENTS COMPLETED FOR ASSESSMENT YEARS 2001 - 02 TO 2006 - 07 IN THE HANDS OF S HRI HEMENDRA R MERCHANT. THE LD A.R SUBMITTED THAT THE ABOVE SAID ASSESSEE FILED A SETTLEMENT APPLICATION BEFORE THE HONBLE SETTLEMENT COMMISSION IN RESPECT OF THE ABOVE SAID YEARS. ACCORDING TO THE ASSESSEE, THE DISCLOSURE OF RS.5.12 CRORES MADE BY IT WAS NOT CORRECT, SINCE THE VARIOUS DEPOSITS INCLUDED THEREIN WERE FOUND TO HAVE BEEN RENEWED SEVERAL TIMES AND MOST OF THEM HAVE BEEN INITIALLY MADE PRIOR TO 1.4.2000. ACCORDING TO THE PETITION FILED BY THE ASSESSEE BEFORE THE HONBLE SETTLEMENT COMMISSIO N, THE ACTUAL AMOUNT OF UNDISCLOSED DEPOSIT WAS ONLY ABOUT RS.28.00 LAKHS. THE LD A.R SUBMITTED THAT THE HONBLE SETTLEMENT COMMISSION HAS SET ASIDE THE ASSESSMENTS RELATING TO THE ASSESSMENT YEARS 2001 - 02 TO 2006 - 07 TO THE FILE OF THE ASSESSING OFFICER F OR DOING ASSESSMENTS DE - NOVA. 7. ON THE BASIS OF THE FACTUAL BACK GROUND DISCUSSED ABOVE, WE SHALL NOW ADJUDICATE VARIOUS APPEALS FILED BY THE PARTIES. 8. ITA NO. 3151/MUM/2011 SHRI HEMENDRA R MERCHANT: - 8.1 THIS APPEAL HAS BEEN FILED BY THE AS SESSEE FOR THE ASSESSMENT YEAR 2007 - 08. WE HAVE NOTICED EARLIER THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT OF THIS YEAR BY ADOPTING THE NET PROFIT RATE AT 70% OF THE GROSS RECEIPTS, I.E., SAME AS WAS FOLLOWED IN THE EARLIER YEARS. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 6 WITHOUT POINTING OUT ANY DEFECTS THEREIN AND ALSO BY MAKING VAGUE OBSERVATIONS. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ALL THE DETAILS THAT WERE CALLED FOR BY THE ASSESS ING OFFICER. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IN THE ALTERNATIVE, THE LD A.R SUBMITTED THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL, IN THE CASE OF PARTNERSHIP C ONCERNS (REFERRED SUPRA), HAS CONFIRMED THE ESTIMATION OF INCOME AT 10% OF THE GROSS RECEIPTS AND ACCORDINGLY PRAYED THAT THE INCOME OF THE ASSESSEE FOR AY 2007 - 08 MAY BE ESTIMATED AT THE SAME LEVEL. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HIMSELF HAS ESTIMATED THE INCOME OF THE ASSESSEE IN AY 2008 - 09 AND 2009 - 10 AT 10% BY REJECTING THE BOOK RESULTS. 8.2 ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS FOR VALID REASONS AND HENCE THE LD CIT(A) HA S CONFIRMED THE SAME. THE LD D.R FURTHER SUBMITTED THAT THERE IS NO PARITY OF FACTS BETWEEN THE ASSESSEES CASE AND THE CASE OF THE PARTNERSHIP CONCERNS AND HENCE THE ORDER RENDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL SHOULD NOT BE FOLLOWED. 8.3 WE HA VE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. A PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE BEFORE US WOULD SHOW THAT THE ASSESSEE IS IN POSSESSION OF VARIOUS DETAILS SUPPORTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ON A PERUSAL OF THE ASSESSME NT ORDER, WE NOTICE THAT THE ASSESSING OFFICER WAS INFLUENCED BY THE DECISION TAKEN BY HIM IN AY 2001 - 02 TO 2006 - 07 AND ACCORDINGLY HE HAS ADOPTED THE NET PROFIT RATE AT 70% OF THE GROSS RECEIPTS FOR COMPUTING THE INCOME OF THE ASSESSEE. WE HAVE EARLIER N OTICED THAT THE ASSESSEE HAD FILED SETTLEMENT PETITION BEFORE THE HONBLE SETTLEMENT COMMISSION FOR AY 2001 - 02 TO 2006 - 07, WHEREIN THE ASSESSEE HAD PUT A CLAIM THAT THE DISCLOSURE OF RS.5.12 CRORES MADE HIM SHOULD BE REDUCED TO RS.28.00 LACS. THE LD A.R I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 7 HA S SUBMITTED THAT THE HONBLE SETTLEMENT COMMISSION HAS RESTORED THE ASSESSMENTS TO THE FILE OF THE ASSESSING OFFICER. THUS, WE NOTICE THAT THE BASIS ON WHICH THE ASSESSMENT OF AY 2007 - 08 WAS MADE BY THE AO HAS BEEN SET ASIDE BY THE HONBLE SETTLEMENT COMM ISSION AND ALL THE MATTERS ARE NOW RESTORED TO THE FILE OF THE AO. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE ASSESSMENT OF AY 2007 - 08 ALSO REQUIRES TO BE SET ASIDE TO THE FILE OF THE AO, SINCE THE VERY BASIS ON WHICH THE PRESENT ASSESSMENT WAS MADE HAS BEEN RESTORED TO THE FILE OF THE AO. FURTHER, THE ASSESSEE IS CONTESTING BEFORE US THAT THERE IS NO SUFFICIENT GROUND THAT WARRANT REJECTION OF BOOKS OF ACCOUNT FOR THE CURRENT YEAR. PRIMA FACIE, THERE APPEARS TO BE SOME MERIT IN THE SAID CONTE NTIONS OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) PASSED FOR AY 2007 - 08 AND RESTORE ALL THE MATTERS, INCLUDING THE MATTERS RELATING TO UNACCOUNTED INVESTMENTS, TO HIS FILE FOR CARRYING OUT THE ASSESSMENT DE - NOVA. IN THE SET ASIDE P ROCEEDINGS, THE AO SHOULD EXAMINE THE BOOKS OF ACCOUNT AND SHOULD ALSO GIVE SUFFICIENT REASONS, IF IT IS FOUND THAT THEY ARE NOT RELIABLE AND REQUIRE REJECTION. THE ASSESSEE HAS ALSO RAISED CERTAIN ADDITIONAL GROUNDS RELATING TO DEDUCTION CLAIMED U/S 80G OF THE ACT; CREDIT FOR TAX PAID ON 31.1.2007 AND CREDIT FOR SHORT CREDIT OF TDS AMOUNTS. THE AO SHOULD ALSO CONSIDER ALL THESE ISSUES ALSO IN THE SET ASIDE PROCEEDINGS. 9. ITA NO.3600/MUM/2014 HEMENDRA R MERCHANT FOR AY 2007 - 08 9.1 THIS APPEAL OF T HE ASSESSEE RELATES TO THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2007 - 08. SINCE WE HAVE RESTORED ALL THE MATTERS OF QUANTUM ASSESSMENT TO THE FILE OF THE AO, THE IMPUGNED PENALTY ORDER SHALL NOT SURVIVE. ACCORDINGLY, WE QUASH THE OR DERS PASSED BY THE TAX AUTHORITIES. HOWEVER, THE ASSESSING OFFICER MAY INITIATE PENALTY PROCEEDINGS AFRESH IN THE SET ASIDE PROCEEDINGS, IF IT SO WARRANTED. I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 8 10. ITA NO.53/MUM/2012 HEMENDRA R MERCHANT FOR AY 2008 - 09 10.1 THIS IS THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2008 - 09. THE AMOUNT INVOLVED ON THE ISSUES DISPUTED IN THIS APPEAL IS RS.21,51,571/ - AND THE TAX EFFECT INVOLVED THEREIN IS LESS THAN RS.10.00 LAKHS. IN VIEW OF THE CIRCULAR NO.21/2015 DATED 10 - 12 - 2015 ISSUED BY THE CBDT, THE REVENUE IS PRECLUDED FROM PURSUING THIS APPEAL, IN VIEW OF THE LOW TAX EFFECT, I.E., LESS THAN RS.10.00 LAKHS. ACCORDINGLY WE DISMISS THIS APPEAL IN LIMINE. 11. CO NO.261/MUM/2012 HEMENDRA R MERCHANT FOR AY 2008 - 09 11.1 THE ASSESSEE HAS FILED THIS CRO SS OBJECTION AGAINST THE APPEAL FILED BY THE REVENUE FOR AY 2008 - 09. IN THIS CO, THE ASSESSEE IS CHALLENGING THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER, SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE IN LIMINE, IT WAS POINTED OUT TO LD A.R THAT THE C O FILED BY THE ASSESSEE MAY NOT REQUIRE ADJUDICATION. THE LD A.R, HOWEVER, SUBMITTED THAT THE ASSESSEES GROUND WITH REGARD TO DEDUCTION U/S 80G MAY BE DIRECTED TO BE CONSIDERED AND ALSO THE CORRECT AMOUNT OF TDS MAY BE DIRECTED TO BE GIVEN CREDIT. ACCOR DINGLY, WE RESTORE THESE TWO ISSUES ALONE TO THE FILE OF THE AO FOR FRESH EXAMINATION. THE ORDER OF LD CIT(A) STANDS MODIFIED ACCORDINGLY. 12. ITA NOS. 3144 TO 3150/MUM/2011 HEMA HEMENDRA MERCHANT ASST. YEARS 2001 - 02 TO 2007 - 08. I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 9 12.1 IT IS NOTICE D THAT THE ASSESSMENTS OF THESE YEARS HAVE BEEN COMPLETED BY THE ASSESSING OFFICER ON THE BASIS OF THE FACTS ORIGINALLY PREVAILING IN THESE GROUP CASES. BOTH THE PARTIES AGREED THAT ALL THE ISSUES REQUIRE FRESH EXAMINATION, SINCE THE ASSESSMENTS PERTAININ G TO SHRI HEMENDRA MERCHANT HAVE BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 12.2 THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS ASSESSED THE INCOME ALLEGED TO HAVE BEEN RECEIVED FROM THE PARTNERSHIP CONCERNS IN AT 2005 - 06 AND 2006 - 07, EVEN THOUGH THE PARTNERSHIP CONCERNS HAVE BEEN DISSOLVED AS ON 31.3.2004. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS ESTIMATED INTEREST INCOME IN THE HANDS OF THE ASSESSEE ON THE PRESUMPTION THAT THE INVESTMENTS MADE IN THE FIXED DEPOSITS HAVE BEEN S OURCED FROM PARTNERSHIP FIRMS. HE SUBMITTED THAT THE INCOME ESTIMATED IN THE HANDS OF THE FIRMS HAVE BEEN SUBSTANTIALLY REDUCED BY THE TRIBUNAL. HE FURTHER SUBMITTED THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING FOR ACCOUNTING FOR INTEREST AND THE SAME HAS TO BE DETERMINED ON ACTUAL BASIS, SINCE THE DETAILS OF ALL FIXED DEPOSITS ARE AVAILABLE NOW. HE FURTHER SUBMITTED THAT THE HUSBAND OF THE ASSESSEE SHRI HEMENDRA MERCHANT HAD DECLARED ALL THE FIXED DEPOSITS, INITIALLY, IN HIS HANDS AND THE QU ANTUM OF UNDISCLOSED FIXED DEPOSITS IS ALSO BEING DISPUTED NOW. 12.3 ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE INTEREST ON FIXED DEPOSITS SHOULD BE ASSESSED ON ACCRUAL BASIS. 12.4 WE HAVE HEARD THE PARTIES AND WE NOTICE THAT ALL THE ISSUES NEED TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATING THEM AFRESH, SINCE THE ASSESSMENTS WERE COMPLETED INITIALLY BY DRAWING CERTAIN PRESUMPTIONS AND THE ISSUES RELATING TO PARTNERSHIP FIRMS HAS SINCE ATTAINED FINALITY. WITH REGARD T O THE ASSESSMENT OF INTEREST INCOME FROM I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 10 FIXED DEPOSITS, WE MAY NOTE THAT THE SAME IS REQUIRED TO BE ASSESSED AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AS PER THE PROVISIONS OF SEC. 145 OF THE ACT. ACCORDINGLY, THE AO MAY DETERMINE ABOUT TH E ASSESSABILITY OF THE INTEREST INCOME ACCORDING TO THE METHOD OF ACCOUNTING OF THE ASSESSEE AND ALSO HE MAY DETERMINE AS TO THE HANDS IN WHICH THEY ARE REQUIRED TO BE ASSESSED. IN THIS REGARD, WE MAY MENTION THAT THE INTEREST SHOULD BE DEEMED TO HAVE BE EN RECEIVED ON THE DATE OF RENEWAL OF THE FIXED DEPOSITS, SINCE THE SAME AMOUNTS TO CONSTRUCTIVE RECEIPT OF INTEREST AND REDEPOSIT OF THE SAME INTO FIXED DEPOSITS. 12.5 AT THE TIME OF DETERMINING THE INTEREST INCOME, THE ASSESSING OFFICER MAY AVOID ESTIMA TION OF INCOME AS FAR AS POSSIBLE, SINCE THE ASSESSEE SHOULD BE IN A POSITION TO FURNISH THE DETAILS RELATING TO INTEREST ON FIXED DEPOSITS. IT MAY ALSO BE ENSURED THAT THE AGGREGATE AMOUNT OF INTEREST INCOME ASSESSED IN THE HANDS OF ALL THE ASSESSEES FOR ALL THE ASSESSMENT YEARS DOES NOT EXCEED ACTUAL AMOUNT OF INTEREST. 12.6 THE ASSESSING OFFICER HAS ALSO ASSESSED THE AMOUNT CREDITED TO THE CAPITAL ACCOUNT OF THE ASSESSEE IN SOME OF THE YEARS. THE LD A.R SUBMITTED THAT THE ASSESSEE SHOULD BE PROVI DED WITH AN OPPORTUNITY TO EXPLAIN THE SOURCES FOR THE SAME. ACCORDINGLY, WE DIRECT THE AO TO EXAMINE THIS ISSUE ALSO IN THE RESPECTIVE YEARS AFRESH. 12.7 THE ASSESSING OFFICER HAS ASSESSED A SUM OF RS.3.25 LACS IN ASSESSMENT YEAR 2005 - 06 AS RELATING TO THE MATURITY PROCEEDS OF THE NATIONAL SAVINGS CERTIFICATE (NSC). THE LD A.R SUBMITTED THAT THE AMOUNT OF RS.3.25 LACS INCLUDES THE PRINCIPAL PORTION OF THE NSC AND SUBMITTED THAT THE SAME CANNOT BE ASSESSED IN THIS YEAR. THERE IS MERIT IN THE SAID CONTEN TIONS OF LD A.R. ACCORDINGLY, WE DIRECT THE AO TO EXAMINE THE SAID CLAIM AND EXCLUDE THE PRINCIPAL POSITION OF NSC. I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 11 12.8 THE LD A.R ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS ASSESSED DIVIDEND INCOME IN SOME OF THE YEARS, EVEN THOUGH THE DIVIDEND INCO ME IS EXEMPT. THE AO IS DIRECTED TO EXAMINE THIS CLAIM OF THE ASSESSEE AND EXCLUDE THE DIVIDEND INCOME, IF IT EXEMPT IN THE CONCERNED YEAR. 13. ITA NOS. 7672/MUM/2013 & 927/MUM/2014 HEMABEN HEMENDRA MERCHANT A.Y 2003 - 04. 13.1 THESE CROSS APPEALS P ERTAIN TO THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. SINCE WE HAVE RESTORED ALL THE MATTERS OF QUANTUM ASSESSMENT TO THE FILE OF THE AO, THE IMPUGNED PENALTY ORDER SHALL NOT SURVIVE. ACCORDINGLY, WE QUASH THE ORDERS PASSED BY THE TAX AUTHORITIES. HOWEV ER, THE ASSESSING OFFICER MAY INITIATE PENALTY PROCEEDINGS AFRESH IN THE SET ASIDE PROCEEDINGS, IF IT SO WARRANTED. 14. ITA NOS. 3141 TO 3143/MUM/2011 M/S HEMABEN & HEMENDRA MERCHANTS TRUST ASSESSMENT YEARS : 2005 - 06 TO 2007 - 08. 14.1 THE ASSESSMENTS I N THE HANDS OF THIS ASSESSEE HAVE BEEN MADE ON PROTECTIVE BASIS AND THE ASSESSMENTS ON SUBSTANTIAL BASIS HAVE BEEN COMPLETED IN THE HANDS OF THE TWO ASSESSEES CITED ABOVE. SINCE ALL THE ISSUES HAVE BEEN SET ASIDE TO THE FILE OF THE AO, WE PREFER TO RESTOR E THESE APPEALS ALSO TO THE FILE OF THE ASSESSING OFFICER. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO 53/M/12 RELATING TO AY 2008 - 09 IS DISMISSED. THE PENALTY APPEALS FILED BY BOTH THE PARTIES IN ITA NO.7672/M/13 AND 927/M/14 FO R ASSESSMENT YEAR 2003 - 04 ARE DISMISSED. THE PENALTY APPEAL FILED BY THE ASSESSEE FOR AY 2007 - 08 IN I.T.A. NO. 3144 / MUM/201 1 AND 15 OTHER APPEALS 12 ITA NO. 3600 /M/1 4 IS DISMISSED. THE CROSS - OBJECTION FILED BY THE ASSESSEE BEARING CO NO.261/MUM/2012 IS TREATED AS PARTLY ALLOWED. ALL OTHER APPEALS FILED B Y THE RESPECTIVE ASSESSEES ARE TREATED AS ALLOWED. PRONOUNCED ACCORDINGLY ON 4TH TH FEB , 2 01 6 . 4TH FEB 2 01 6 SD SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 4TH FEB , 2 01 6 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCER NED 6. / GUARD FILE. / BY ORDER, TRUE COP (ASSTT. REGISTRAR) , /ITAT, MUMBAI